Financial Crime World

Indonesia’s Efforts to Prevent Money Laundering Receive Thumbs Up, But Improvements Needed: Experts

Indonesia has made significant progress in tackling money laundering and terrorist financing, with a robust legal framework and effective use of financial intelligence and international cooperation. However, experts warn that more needs to be done to improve asset recovery, risk-based supervision, and proportionate sanctions.

Key Challenges Faced by Indonesia

  • Risk of money laundering from domestic crimes such as corruption, narcotics, tax evasion, and forestry crimes
  • High risks of terrorist financing due to the presence of terrorist organizations and their supporters within its borders

Assessment by FATF Report

According to a recent FATF (Financial Action Task Force) report, Indonesia has a good understanding of the risks it faces and has developed policies and strategies to mitigate them. The country’s financial supervisory authorities have also proactively developed its anti-money laundering/combating the financing of terrorism (AML/CFT) framework.

Improvements Needed

  • Risk-based supervision needs improvement, particularly in sectors such as:
    • Money changers
    • Money or value transfer services
    • Non-financial institutions
  • Effective and dissuasive sanctions are needed across all sectors
  • Accurate information on the ultimate owners of companies is necessary for law enforcement

Strengths of Indonesia’s AML/CFT Framework

  • The Indonesian Financial Intelligence Unit has been praised for providing high-quality financial intelligence to law enforcement agencies, leading to successful investigations into money laundering and terrorist financing cases
  • Indonesia’s strategy to combat terrorist financing has also been commended, with a focus on returning foreign terrorist fighters and de-radicalization

Shortcomings and Future Directions

  • Improvements are needed in the investigation and prosecution of different types of money laundering activities, particularly those related to assets located abroad or from forestry or environmental crime
  • Indonesia needs to improve its understanding of the risk of abuse of its non-profit sector for terrorism financing and take proportionate measures without disrupting legitimate charitable activities

Conclusion

Despite some shortcomings in its legal framework for targeted financial sanctions on proliferation financing, Indonesia has made progress in addressing these issues. Experts believe that Indonesia’s continued efforts to improve its AML/CFT regime will be crucial in preventing money laundering and terrorist financing, and ensuring a safer financial environment for all stakeholders.